Preview Assignment 7 (Chapter 22)

The primary purpose of the statement of the cash flows is to provide information about the:

A. entity’s ability to pay dividends and meet obligations

B. reasons for the difference between net income and net cash from operating activities

C. entity’s ability to generate future cash flows

D. entity’s cash receipts and cash payments during a period

D. entity’s cash receipts and cash payments during a period

Net cash flows from operating activities under the infirect method is determined by eliminating:

A. noncash revenues and noncash expenses from net income

B. incurred expenses from net income

C. only noncash expenses from net income

D. earned revenues from net income

A. noncash revenues and noncash expenses from net income

The payment of a cash dividiend would be classified as a(n):

A. significant noncash transaction

B. operating activity

C. investing activity

D. financing activity

D. financing activity

Which of the following is the first step in preparing the statement of cash flows?

A. Determine the net cash flow from operating activities

B. Determine the net income

C. Determine the cash flow from investing activities

D. Determine the change in cash

D. Determine the change in cash

Which of the following is not one of the benefits that creditors and investors can derive from the statement of cash flows?

A. Assess the effectivesness of management’s borrowing policy

B. Assess the company’s ability to pay future cash dividends

C. Assess the company’s ability to generate funture cash flows

D. Explain the difference between net income and net cash flow from operating activities

A. Assess the effectivesness of management’s borrowing policy

Which of the following is not one of the three activities classified on the statement of cash flows

A. Managing

B. Operating

C. Investing

D. Financing

A. Managing

Under the direct method of preparing the statement of cash flows, cash receipts from customers is equal to:

A. Sales revenues - Increase in A/R

B. Sales revenues - Decrease in A/R

C. Sales revenues + Increase in A/R

D. Net sales revenue

A. Sales revenues - Increase in A/R

Activities involving the cash effects of transactions that enter into the determination of net income are:

A. investing activities

B. noncash investing and financing activities

C. operating activities

D. financing activities

C. operating activities

All of the following would be considered investing activities execpt:

A. sale of land for cash

B. purchase of equipment for cash

C. purchase of 25% interest in the stock of a supplier

D. receipt of cash dividends from equity investment

D. receipt of cash dividends from equity investment

Appalachian Ski Shop financed its inventory by signing a 90-day note payable to a local bank.

A. cash inflow from investing activities

B. cash inflow from operating activities

C. significant non-cash investing and financing activities

D. cash inflow from financing activities

D. cash inflow from financing activities